How to Find Non-Warrantable Condo Lenders: Tips and Strategies
6 minute read
May 12, 2024


As a real estate investor, purchasing a condo with a traditional mortgage may be a straightforward step toward your investment goals.

You may also have already started the process with a traditional lender, only to be denied a loan or rejected early in the process.

You’ve come to the right place if you’re in either of these scenarios. What you’re looking for is a non-warrantable condo lender.

In this article, we’ll explain why securing a loan for non-warrantable condos is challenging through traditional means and what you can do instead.

Start your application with Park Place Finance

What is a non-warrantable condo?

There are two main types of condos: warrantable and non-warrantable.

Non-warrantable condos do not meet the specific guidelines established by government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac.

Fannie and Freddie’s guidelines are structured to ensure properties are safe, financially secure investments for lenders.

Because non-warrantable condos do not meet the strict criteria, the mortgages are not eligible for purchase by these entities on the secondary market.

Characteristics of non-warrantable condos

Non-warrantable condos have specific characteristics that make it easier for investors to identify potential challenges and opportunities.

These characteristics include:

  • Majority of condos are owned by investors: Typically, if more than 50% of the units are non-owner-occupied or rented out, the condo is considered unwarrantable
  • Commercial space: If a certain percentage of the total square footage of the building is used for commercial purposes, it will not meet Fannie and Freddie’s guidelines
  • Single owner: If a single developer or investor owns more than 10% of the units
  • Legal disputes: If the condo association or developer is involved in any legal disputes, specifically related to financial management or construction
  • Construction incomplete: If there are still units under construction, this is a red flag to traditional lenders that signals a higher-risk investment
  • Insurance issues: If the development lacks adequate insurance coverage, such as hazard, flood, or liability insurance

While these characteristics translate to a higher risk for traditional lenders, hard money lenders such as Park Place Finance view them as opportunities for investors.

Warrantable vs. non-warrantable condos

Warrantable condos are more desirable to traditional lenders for the following reasons:

  • They meet Fannie and Freddie’s standards
  • They are easier to sell
  • They have a lower risk profile

Of course, this all signals to traditional lenders that the borrower is less likely to default on the loan or face legal troubles than they might with a non-warrantable condo.

What are the challenges borrowers face in getting a loan for a non-warrantable condo?

If you’re an investor seeking financing for a non-warrantable condo, you are likely to face the following challenges:

  • Fewer lenders willing to finance: Banks and credit unions prefer to finance properties that meet the guidelines set by Fannie Mae and Freddie Mac
  • Higher interest rates: The property’s higher risk will result in higher interest rates to offset the risk
  • Larger down payments: Similarly to the higher interest rates, a larger down payment is meant to help offset the higher risk of non-warrantable condos
  • Stricter lending criteria: To prove you can make your monthly payments, you may be required to submit additional documentation, have a lower debt-to-income (DTI) ratio, or have a higher credit score

For many investors, these challenges make it difficult or nearly impossible to purchase a non-warrantable condo through traditional means.

Loan options for non-warrantable condos

Investors interested in non-warrantable condos will need to explore alternative loan options.

Hard money loans are the solution for real estate investors because they do not need to meet the strict requirements established by Fannie Mae and Freddie Mac.

Hard money loans offer the following benefits:

  • Rapid approval and funding
  • Flexible lending criteria
  • Greater emphasis on the value of the property than the borrower’s finances

Hard money loans are typically funded by private investors or investment groups rather than traditional financial institutions like banks.

Private lenders can set their terms and conditions because they are not bound by the same guidelines as banks.

Strategies to secure a non-warrantable condo loan

To improve your chances of securing financing for a non-warrantable condo, consider the following strategies:

  • Get an appraisal to confirm the property’s current market value
  • Prepare your documentation, including bank statements, list of real estate owned, and LLC/entity documents if applicable
  • Highlight your investment experience, including successful previous projects
  • Be prepared for slightly higher interest rates
  • Be prepared to answer detailed questions about the property, the condo association, your investment plan, and your exit strategy

Unlike traditional lenders, private lenders like Park Place Finance are more interested in developing partnerships with their clients for years of successful deals.

Go into the process with a relationship-building mindset, and get to know the lender’s background and experience to ensure it matches your unique investment needs and goals.

How to prepare for the loan application process

The best way to prepare for the loan application process for a non-warrantable condo is to contact the lender and discuss their specific requirements.

This simple step will help you go into the process as prepared and minimize delays.

Here are some tips for preparing for the loan application process with a hard money lender:

  • Create a document checklist with the lender’s assistance
  • Scan and organize digital copies of all required documents for easy submission and reference
  • Be aware of the interest rates, fees, repayment schedule, and loan terms so you can financially prepare
  • Develop a clear business plan, including a project timeline (if applicable) and exit strategy
  • Complete the application form accurately and thoroughly, and be prepared to submit any follow-up documentation as quickly as possible

Transparency and honesty are important in the hard money lending process, not only for building trust with your lender but also for ensuring that there are no unexpected delays that result from leaving out any property or personal details.

Get started with Park Place Finance

Park Place Finance is a direct hard money lender with in-house capital.

We have funded over $1 billion in loans nationwide across 17 years in business.

When you choose to work with us, you can rest assured that a team of real people will be dedicated to funding your deal as quickly as possible.

Start your application online or call (866) 407-1599 for more information. We look forward to finding out how we can meet your needs.


More on Real Estate Investing